How to Build a Referral-Based Business, So You Never Need to Rely On Paid Lead Sources Again

Welcome back to Real Estate Team Builders. Lars Hedenborg here, founder of Real Estate B School and creator of this podcast. This podcast exists to help folks that are in the process of building real estate teams or you want to build a real estate team or you're far into building a real estate team and maybe it's just not working out the way that you thought. It's not sustainable, it's not profitable. You are head over heels in production and there's no accountability for expenses or people. And many of the teams that have achieved a high volume of transactions are not built on solid foundations. So we are here to help you in every way possible. On our Monday episode, we had Todd Tremonti in, I think it was Dallas Fort Worth runs an awesome, awesome business. He went into. You know how he provides a value to his clients that ultimately allows his business to sustain this virtuous cycle where he can bring someone into the business. I think he said like 55 or something percent of his business was referral based and over 2 million or so in production. And he just runs an awesome, awesome business and, and his premise, and I agree with it and we've been teaching it Since I think 2015 was the first session on how to scale a referral based business. And that's the topic that we're going to decide we're going to jump into today. So the conversation around, you know, scaling a real estate team versus doing it sustainably, oftentimes they're not intertwined, meaning that there are many teams that are scaling, but they're doing it in a way that it's not sustainable. Meaning they're paying for home search leads, they're giving a lot of money to zillow or realtor.com their business is super buyer heavy, which we don't think that is the way to build a business. It ends up being this sort of you're always chasing the lead versus providing a level of service that is above and beyond anyone in your market, anyone in the country in terms of helping real estate buyers and real estate sellers. That is the goal of a business. And we, we think about it in a way where our survival depends on it. So this is the guiding question for, for you guys today. So how am I thinking about my business in terms of my ability to scale? Solely by getting referrals based on the service my team provides and then also the people you know. So essentially database and referral marketing, right? Let's say you couldn't pay for any leads at all and you still had to scale your Real estate team, you know, as an industry, we don't do a great job. We don't, you know, the majority of the industry is still a bunch of solo real estate agents that are doing all the tasks required to get from a lead generated to a lead contacted to met to signed as a loyal client to, you know, under contract to closing and then, you know, hopefully keeping in touch and providing value after the transaction there. It's just not possible that one person can do all of those things in a transaction in the life cycle of the customer, right? From not even knowing who you are all the way to keeping in touch with them forever and helping them with future deals. And as a result, I believe most agents even they're, even if they're traditionally successful, they're barely hanging on and the service is, is, is what suffers, right? These agents are, you know, and I say these agents. This was me back in the day when I was scaling quickly. My first year as a solo agent, first full year, I did 44 transactions. It was not based on client care, but I was just starting to put in systems around client care that would generate referrals during the transaction. And that's something that we measure today in the teams that we coach. The other thing I want to talk about a little bit is that these lead providers, the reason you want to take a stand and draw a line in the sand around how you're going to generate new business in the future and that taking care of your clients is the way to generate business, is that we don't have any friends, right? Zillow realtor.com they're not your friend. Their goal is to take as much money as possible from the commission check, right? All the agents going to Zillow Flex, I mean, in theory, I guess there's nothing wrong with Zillow Flex. Well, no, I don't even, it's not even in theory. The fundamental flaw with Zillow Flex is that they're going to take a percentage of every transaction. You can't even game it a little bit by buying the lead and being so good at lead management and lead follow up that you can get a higher return than the 35% that they want to charge in Zillow Flex. So you cannot sustain and scale your business based on 35% of your, your GCI going to the person that you're basically just admitting that they're a better marketer than you. And then you have agents saying, but it's free, it's free. We don't have to pay Zillow anymore. It's like, oh my gosh. And so at some point, you have to wrap your head around an economic model and just say, enough is enough, right? And there's this quote by Gary Vaynerchuk, and I'm going to read it here. I don't believe in everything that Gary Vee, his hustle and, you know, work all the time mentality. I don't believe in all of that. But this is really, really good. And I think it's from the book thank youk Economy. So it's an older book, but he says, I believe we're living through the early days of a dramatic culture shift that is bringing us back full circle. And the world we live and work in now operates in a way that is surprisingly similar to the one our great grandparents knew. Social media has transformed our world into one great big small town dominated, as all vibrant towns used to be, by the strength of relationships, the currency of caring, and the power of word of mouth. And this is where, you know, if you're scaling, if you want to scale your real estate team and you want to do it in a way that is sustainable, meaning that the business is going to run mostly without you in it, but it's going to sort of run on its own, meaning you're going to do a great job for your clients and they're going to bring you more business. And it's this sort of sustainable is the word I'm thinking of. But it's a virtuous cycle, meaning that you do a good job, you get more business, you do a good job, you get more business. You're not like, you know, looking for the next paid lead source, which is what the industry is wanting us to do. And there's I've got this story of my wife and I took a flight on American Airlines flight, and it was, the service was phenomenal. And the airline stewardess wrote us a handwritten note, said, essentially, thanks for traveling with us, looking forward to serving you in the future. And then right when we went off the plane, we got an email that was a net promoter score, essentially asking the question, like, how likely are you to recommend whatever you, your real estate team or American Airlines to a friend or colleague where 10 is extremely likely likely and 0 equals extremely unlikely. So if you're not in the game of asking that question to your clients consistently and then taking action even at multiple parts in the, in the client journey, you're. You're going to ultimately lose the game. And so we have to rethink our funnel where the byproduct of doing a good job is more business. And that's where the virtuous cycle comes from. There's a book called Raving Fans. Ken Blanchard says your customers are only satisfied because their expectations are so low and because no one else is doing better. Just having satisfied customers isn't good enough anymore. If you really want a booming business, you have to create Raving Fans. And then we go into the conversation, well, how does you know outside of getting a referral before a client leaves the closing table? So re engineering and rethinking your process in such a way, from the moment you first talk to somebody, whether they're a referral or a paid lead source, but your conversations are moving toward them, being blown away. And you're going to get referrals in the actual process of buying and selling, helping them buy and sell. And so when you leave the closing table, you can measure whether or not that worked. So that's definitely one thing you need to do, is engineer the client service process where referrals while you're working with them is the byproduct, but then also social proof, right? Social proof is getting your clients to say good things about you online. So when folks are searching for the best real estate agent in Charlotte, North Carolina, the natural choice is going to be the firm, the real estate agent that has the most amount of reviews. I'm going to tell the brief version of this story, but I had an experience with my dentist. And it's the kind of dentist that you could tell is sort of set up differently where you get a tour of the office when you first come into their world. And you know, it's just a different experience. You can tell that they're scripted and they have a process for everything. So the first time I went there, when I was leaving, the person that was checking me out, not checking me out, like, hey, checking me out, like taking my credit card, asked me a question like, hey, Lars, have you given us a five star review yet? And I said, no, I hadn't. And so she guided me through the process of, of pulling up a browser, going on Google, leaving a five star review. And it really sort of blew my mind. And I asked her two questions like, why do you think the owners asked you to do that and do you get paid like a bonus for it? And I'm having them implement this at the time, and I did that at the time we were at like 50 or 60 Google reviews. And Google especially, because Google's like 97% of searches, you don't want to put them all on Zillow. Zillow is a paid platform. They can manipulate and do crazy stuff with it. So on Google we went from 60 to, I think the team has over like 1400 or something at this point. And that was just three years later or so. And so this doesn't happen overnight. Right. So you've heard me talk about James Clear, the book Atomic Habits. The most favorite quote from the book that applies to almost everything that we do in life and business is you do not rise to the level of your goals, you fall to the level of your systems. And so if you don't have a documented plan for client care, we run all of our client care processes. Every aspect of the transaction, from first conversation to when we meet them, to when we get them under contract, to when we close them, is all managed via checklists and dialogue and a heavy or a high level of client touch via Trello. And our members get access to all of it. And so you have to really consider as you build this client care process as the engine of your business, you only, I believe, survival, your survival depends on it. But your success is with this mindset that if every other lead source went away, what would be left? Would I have a viable business? If you, if you answer that question and you can't like emphatically answer it, like, heck yes. My, my whole existence, you know, has existed and we were scaling our real estate team based on providing a world class experience to our buyers and to our sellers and of course to our team members. Right. That's the other part that we're not going to talk about today. But the other part is providing an experience and an atmosphere, a culture, a cadence to your team members that allow for them to serve buyers and to serve sellers in a way that trumps any thing that's out there. And Todd mentioned that as well. But we didn't get a chance to cover that today. So hopefully there's some good stuff to grab on in here and at least just to get you to think about like your team and your real estate experience. Is it based on just kind of getting it through, like dragging your client to the finish line, or are you proactive in your communications? Are you scripted in your communications? Right. And if you're not, then you have to just begin to build out those systems and processes. And I would say in terms of helping you do that, I would go and grab a copy of, I think in terms of the overall picture and the drivers and accelerators and success stories, tangible success stories. Go grab a copy of the book scaleordiebook.com there's no charge for it. You literally get a copy. Just give us your email, we email you a copy. Um, I will go to ScaleOrDiveBook.com I lay out my entire journey. I lay out all the drivers and accelerators attract Convert Deliver scale and all the different facets and how to go about literally setting up your business in a way where as you attract Convert Deliver, you have the ability to scale your real estate team to 1 million, 2 million, 3 million, wherever you want to go. And so check that out. And as always, we appreciate you joining us here. If you feel so compelled, I would share this episode or other episodes, leave us a five star review on the service or the podcast player that you use. And much love. We'll talk to you guys soon. Be good.